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Are All Americans Saving ‘Optimally’ for Retirement?

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Author Info

  • John Karl Scholz

    (University of Wisconsin–Madison and NBER)

  • Ananth Seshadri

    (University of Wisconsin–Madison)

Abstract

Many people fear that Americans are preparing poorly for retirement. But developing rigorous evidence on this issue is difficult. In this paper we briefly discuss evidence on the adequacy of retirement wealth accumulation. We conclude that existing descriptive evidence does not seem consistent with dire assessments of poor financial preparation. We then extend the straightforward, but computationally complex dynamic programming approach used in our earlier work to assess the adequacy of retirement wealth preparation of Americans born before 1954. We find only 4 percent of HRS households have net worth below their optimal targets in 2004, though this percentage is somewhat higher for more recent HRS cohorts. While our work is preliminary, we find little evidence that Americans born before 1954 have prepared poorly for retirement.

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Bibliographic Info

Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp189.

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Length: ## pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:mrr:papers:wp189

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  1. Hubbard, R Glenn & Skinner, Jonathan & Zeldes, Stephen P, 1995. "Precautionary Saving and Social Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 360-99, April.
  2. Lazear, Edward P & Michael, Robert T, 1980. "Family Size and the Distribution of Real Per Capita Income," American Economic Review, American Economic Association, vol. 70(1), pages 91-107, March.
  3. Steven Haider & Gary Solon, 2000. "Non Random Selection in the HRS Social Security Earnings Sample," Working Papers 00-01, RAND Corporation Publications Department.
  4. David Love & Michael Palumbo & Paul Smith, 2008. "The Trajectory of Wealth in Retirement," Department of Economics Working Papers 2008-10, Department of Economics, Williams College.
  5. William G. Gale & John Sabelhaus, 1999. "Perspectives on the Household Saving Rate," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(1), pages 181-224.
  6. John Karl Scholz & Ananth Seshadri & Surachai Khitatrakun, 2004. "Are Americans Saving "Optimally" for Retirement?," NBER Working Papers 10260, National Bureau of Economic Research, Inc.
  7. repec:crr:issbrf:ib2007-7-11 is not listed on IDEAS
  8. Eric M. Engen & William G. Gale & Cori R. Uccello, 1999. "The Adequacy of Retirement Saving," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(2), pages 65-188.
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Cited by:
  1. Ron J.G. van Schie & Bas Donkers & Benedict G.C. Dellaert, 2012. "Savings Adequacy Uncertainty: Driver or Obstacle to Increased Pension Contributions?," Tinbergen Institute Discussion Papers 12-037/1, Tinbergen Institute.
  2. van Rooij, Maarten & Lusardi, Annamaria & Alessie, Rob J. M., 2011. "Financial literacy, retirement planning, and household wealth," CFS Working Paper Series 2011/21, Center for Financial Studies (CFS).
  3. Tatom, John, 2010. "Financial wellbeing and some problems in assessing its link to financial education," MPRA Paper 26411, University Library of Munich, Germany.

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